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#MogulMinute 1/9/2017

January 9 | 2017

Here at RealtyMogul.com, we keep our finger on the pulse of all things real estate, from finance to technology and everything in between. We make a point of sharing interesting articles and think pieces among RealtyMogul.com staff to help our team stay abreast of the market, and ahead of the curve.

So we thought, why not share some of these insights with you, our partners?

Got A Minute? Here’s some recommended reading with key points from the content:

The economy added approximately 156,000 jobs in December, a number that is slightly below November’s total of 204,000 jobs. The unemployment rate remained steady at 4.7% and continues to hover around historical lows (see chart below).

Despite moderating job growth, wages grew at their best annual rate since 2009.

For the year, the economy added approximately 2.2 million jobs, the lowest figure since 2011.

The latest Cushman & Wakefield (C&W) U.S. Macro Forecast is bullish on the US economy and commercial property markets in 2017. "Even before the election, the U.S. economic fundamentals were showing signs of heating up," said Kevin Thorpe, Cushman & Wakefield's Global Chief Economist. "We observed a big GDP number in Q3, accelerating wage growth, surging consumer confidence - a string of really robust trends were already forming. Now when you layer in the expected tax cuts and spending multipliers from the New Administration, it creates an even stronger economic backdrop for the property markets heading into 2017."

Although some of the expected stimulus measures should be negated by tighter monetary policy and higher interest rates, C&W is forecasting US real GDP to grow 2.3% in 2017 and 3.0% in 2018. "This will be enough growth to generate over 3 million net new jobs over the next two years and an increasingly robust environment for consumers. This will drive more demand for real estate space than was previously assumed." - Rebecca Rockey, Cushman & Wakefield Head of Americas Forecasting.

According to the article, Cushman & Wakefield expects the following for the US CRE sector in 2017:

Office – Net gain of 438,000 new office jobs in 2017 and absorption of 54.9 million square feet in 2017.

Retail – Sales should continue to shift to e-commerce as several major retail categories could be in contraction mode. However, neighborhood/community and power centers should be the least impacted by the shift.

Investment Sales – Investment sales volume is expected to decrease 2.2% in 2017. However, it should remain well above the historical average over the past 15 years with $455.7 billion in activity in 2017.

The delinquency rate for US commercial real estate loans in CMBS increased to 5.23% at the end of the fourth quarter. This is the ninth increase over the past 10 months and the highest level the rate has been at since October 2015 but lower than the all-time peak rate of 10.34% in July 2012. The increase in the rate is primarily a product of what is left as the better performing CMBS deals originated in 2006 and 2007 have already been defeased or paid off before their maturity dates.

Refer to the chart below for the breakdown by asset type. Multifamily and Lodging continue to outperform other asset types while the office sector brings up the rear:

Macy’s has announced the locations of 68 of the 100 planned stored closings after comparable store sales underperformed guidance in November and December and 2017 expectations are expected to be in line with these trends.

“As part of a strategy to streamline its portfolio, Macy's moves will save the company an estimated $550 million a year starting in 2017. The company will use these proceeds to invest an additional $250 million in its digital business, as well as the growth of its Bluemercury beauty shops, Macy's Backstage off-price stores, and China.”

Written by Tim Ednoff, Associate - Commercial Equity at RealtyMogul.com

Tim evaluates investment opportunities as well as performs due diligence and writes content for various equity and debt transactions. Outside of the office, Tim is an avid sneaker collector, a passionate health and fitness advocate, and a dedicated podcast enthusiast.